The US economy grew less than expected at the end of last year, dragged down by a record-long government shutdown, consumer spending and trade.
Inflation-adjusted gross domestic product increased an annualized 1.4% in the fourth quarter after rising 4.4% in the prior period, according to the government's initial estimate out Friday. Overall, the economy expanded 2.2% last year, data from the Bureau of Economic Analysis showed.
The weak quarterly results — which were below all forecasts in a Bloomberg survey of economists — came as the US government was shut down for almost half of the three-month period. The BEA said the reduction in federal services during the shutdown subtracted about 1 percentage point from GDP, though the full impact couldn't be estimated.
Less than an hour before the data were released, President Donald Trump posted on social media that the shutdown would cost the US “at least two points in GDP.”
| Indicator | Actual | Estimate |
| GDP (4Q) +1.4% +2.8% Personal consumption (4Q) +2.4% +2.4% PCE price index, excl. food, energy (Dec.) +3.0% +2.9% | +1.4% | +2.8% |
| Personal consumption (4Q) | +2.4% | +2.4% |
| PCE price index, excl. food, energy (Dec.) | +3.0% | +2.9% |
Source: Bloomberg
Despite the year-end slowdown, the data still cap a solid year for the US economy, which shrank in the first quarter amid a monumental pre-tariff surge in imports, only to bounce back later in the year. The turnaround came after Trump backed off of his most punitive levies and the Federal Reserve lowered interest rates, helping drive the stock market to record highs and enabling wealthier Americans to keep spending.
Trump reclaimed the White House last year with a promise to deliver a “golden age” for the US, including by bringing manufacturing back to the country and lowering the cost of living. Factory activity only just started to pick up after an extended slumber and the inflation rate barely budged in 2025 — putting affordability front and center for this year's midterm elections.
Separate monthly BEA data out Friday showed the Fed's preferred measure of underlying inflation — known as the core personal consumption expenditures price index — rose 0.4% in December, the most in nearly a year. On an annual basis, the core PCE, which excludes food and energy, climbed 3%, compared to 2.8% at the start of 2025.
Stock futures and Treasuries fell after the report.
Shutdown Impact
Federal government spending, excluding defense, declined 24.1% at the end of the year, the most since 2020. During the shutdown, hundreds of thousands of workers went without pay, and other spending on benefits was disrupted. Bloomberg Economics estimated the closure reduced economic activity by about $100 billion.
Consumer spending, which comprises the largest share of economic activity, decelerated to a 2.4% pace from 3.5% in the prior period. The slowdown was mostly due to less spending on durable goods like cars.
Net exports also weighed on fourth-quarter growth, barely adding to GDP. Thursday data showed a widening in December's trade deficit.
Business investment grew by 3.7%, powered by information processing equipment, likely connected with a boom in artificial intelligence spending. That's expected to juice the economy even more this year, with four of the biggest US technology companies already forecasting they'll collectively spend about $650 billion in 2026 toward data centers and related equipment.
Because swings in trade and inventories distorted overall GDP last year, economists are paying closer attention to final sales to private domestic purchasers, a narrower metric of demand. This measure rose at a 2.4% pace in the fourth quarter, also a slowdown but still solid.
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